Cryptocurrency is on the up, and beyond recognizing that it sounds like something from James Bond or Mission Impossible (and therefore must be pretty cool), a lot of people don’t have a good understanding of what it is exactly, or how it works. To the uninitiated, it is an incredibly confusing and complex area – so whether you want to gain an understanding for your own interest or if you want to start investing, learning the basics is a good place to start.
So with that in mind, we’ve put together a quick introduction to what cryptocurrency is and how it works in layman’s terms.
What is cryptocurrency?
Like physical money, a cryptocurrency can be exchanged for goods and services or invested to trade for profit. However unlike ‘real’ money, cryptocurrencies can only be used online and many companies have their own individual currency- similarly to how Monopoly money only works for Monopoly, or Disney dollars only work at Disneyland. Examples of well-known cryptocurrencies include Bitcoin, Litecoin, and Ethereum, but it’s estimated that there are over 4000 cryptocurrencies out there.
How does Cryptocurrency work?
Cryptocurrencies run on decentralized technology called Blockchain which records and handles transactions. One of the main appeals of cryptocurrency is that it doesn’t require a user to provide details or go through a bank, and it is also highly secure.
How do you get cryptocurrency?
Unsurprisingly, you can’t go down to your local bank and ask to convert your dollars to Bitcoin or any other cryptocurrency. Cryptocurrency is earned by ‘mining’ for it online, which involves solving complex equations to get a cryptocurrency ‘reward’, or it can be bought from brokers and stored in cryptographic wallets.
Cryptocurrency wallets are the only way to show ownership of digital currency, as they contain secret keys which allow you to sign for and authorize cryptocurrency transactions.
An MPC wallet is a more secure form of cryptocurrency storage, which does away with lengthy passwords to enable secure storage of mpc coin. Instead of lengthy hexadecimal passwords, MPC wallets require several users in order to unlock. It’s currently used by companies rather than individuals but is likely to become a more widely available technology in the future.
Cryptocurrency is not an easy topic to master – but we hope this beginner’s guide to some of the terminology and basic workings is helpful to you.